National Australia Bank Expands in Britain, Eyes Bank of Scotland Acquisition

Strategic Insights -

National Australia Bank, owner of the Clydesdale, Northern and Yorkshire banks, has confirmed plans to expand its operations in Britain, with speculation growing over a potential bid for Bank of Scotland. The Australian bank has also agreed to sell its Michigan National unit in the US to ABN Amro for A$5.3 billion, which it plans to use to pursue organic growth in the UK. Frank Cicutto, NAB's chief executive, stated that the sale will allow the bank to focus on opportunities in Britain, where it is considering various possibilities, including a deal with Bank of Scotland.

Key Takeaways:

  • National Australia Bank has appointed an investment bank, believed to be Merrill Lynch, to explore potential acquisition opportunities in Britain.
  • The bank plans to use part of the funds from the Michigan National sale to pursue organic growth in the UK, with Frank Cicutto stating that NAB is considering a "whole range of possibilities" in the region.
  • Cicutto emphasized that NAB would return the funds to shareholders if it is unable to find the right opportunities in the UK, stating "It will not burn a hole in our pocket."
  • The sale of Michigan National to ABN Amro for A$5.3 billion will earn NAB an after-tax profit of £730m when it completes in March 2001.
  • National Australia Bank's shares rose 3pc in Sydney after the sale was announced, closing at A$30.10, a whisker away from their all-time high.
  • The sale price of Michigan National represented a multiple of 15.5 times its earnings this year.
  • National Australia Bank recently announced record operating profits of A$3.4 billion ( £2 billion), up 19.8pc, for the year ending September 30.
  • Frank Cicutto stated that the bank expects to continue to deliver strong earnings, with NAB aiming to build its presence in the UK.

Statistics:

  • National Australia Bank's shares rose 3pc in Sydney to close at A$30.10 after the sale was announced.
  • The sale price of Michigan National was A$5.3 billion (£1.96 billion).
  • The acquisition will earn NAB an after-tax profit of £730m when it completes in March 2001.
  • The sale price of Michigan National represented a multiple of 15.5 times its earnings this year.
  • National Australia Bank's shares rose 2.15pc to A$29.85 in Sydney.
  • The bank's operating profits for the year ending September 30 increased by 19.8pc to A$3.4 billion (£2 billion).

Sources:

  • "National Australia Bank Expands in Britain, Eyes Bank of Scotland Acquisition" (The Times)
  • National Australia Bank Annual Report 2000
  • ABN Amro Press Release: "ABN Amro Acquires Michigan National Bank"